Why did they divide instead of using the formula

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Original Problem: "You are considering buying a new car. The sticker price is $15,000 and you have $2,000 to put toward a down payment. If you can negotiate a nominal annual interest rate of 10 percent and you wish to pay for the car over a 5 year period, what are your monthly car payments? "

For this question; I solved for the EMR by using the k=(1+QR/m)m/f formula and got an effective rate of 0.7974% however the answer key I am working with simply divided the 10% by 12 (10/12) to get an EMR of 0.8333%. Why did they divide instead of using the formula?

ANSWER KEY WORK:

First, find the monthly interest rate = 0.10/12 = 0.8333%/month. Now, enter in your calculator N = 60; I/YR = 0.8333; PV = -13000; FV = 0; and then solve for PMT = $276.21.

Reference no: EM132386355

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